UNC economist estimates AI buildout drove over half of past year’s economic growth

AI’s construction boom accounted for more than half of economic growth over the past year, UNC economist Gerald Cohen estimated in November 5 comments to ABC11. He warned that slower data-center development could hurt the economy, as Democratic election victories put proposals to restrict construction under renewed scrutiny.

Cohen, an economist at UNC’s Kenan Institute, offered a calculation of how much recent growth depended on the buildout—not a forecast that the same contribution will continue. His warning concerns what happens if construction slows: an industry he credits with a large share of recent economic gains would provide less support.

A market rally, but a construction question

The assessment followed Democrats’ victory in both chambers of Congress in the November 3 midterms. U.S. markets rallied Wednesday, with the Dow Jones Industrial Average gaining nearly 1,600 points. By Thursday afternoon, the major indexes were giving back some gains. That broad market response accompanied a more specific concern about the outlook for AI infrastructure.

Cohen said reduced policy uncertainty could help explain investors’ favorable response. Divided government can limit large policy changes, he said, describing the market view as “gridlock is good.” Democrats will control Congress while Republicans retain the White House. The potential benefit is predictability, rather than agreement between the parties on a new economic agenda.

Business leaders also emphasized stability. Continental finance chief Roland Welzbacher told Reuters that the company needed “stability and a reliable economic framework,” according to FOX Business. Those expectations concern the overall business environment; technology investors were also weighing the possibility that closer oversight would delay particular construction projects.

Texas proposals put resources at the center

Texas provides a concrete reason that a slowdown is being discussed. Governor-elect Gina Hinojosa campaigned on a moratorium on new data-center approvals. FOX Business described her position as maintaining a construction pause until the state addresses the facilities’ electricity and water demands. Her election victory is not itself the enactment of that campaign proposal.

U.S. Senate candidate James Talarico proposed tighter regulation of data centers’ energy, water and infrastructure use, ABC11 reported. The two campaign positions point toward greater oversight but describe different approaches: pausing new approvals and tightening the rules governing resource use. Neither should be read as confirmation that a new nationwide restriction has taken effect.

Gerstner rejected fears of a broad halt to AI infrastructure development as exaggerated, while acknowledging that additional regulation could delay some projects. His estimate describes possible exposure, not capacity already canceled. That distinction places his assessment between an uninterrupted construction boom and a sweeping shutdown: some development could face delays without the entire buildout stopping.

Where investment might go instead

Cohen also offered a conditional argument for a slower pace. If rapid data-center expansion has drawn resources and investment away from other parts of the economy, easing that expansion could benefit those sectors. The potential gain depends on that diversion having occurred; his argument is about investment finding other uses, not a claim that less AI construction automatically produces stronger growth.